Epic Real Estate Investing - How to Hire the Best Property Manager for Your Rental | 764

Episode Date: September 3, 2019

Inspired by Hold that House Show, Mercedes shares the 10 Commandments of Property Manager. Tune in, go through all the 10 points, and choose your property managers wisely! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing show for Turnkey Tuesdays with your host, Mercedes-Torres. Hello and welcome. Welcome to Turnkey Tuesdays, brought to you by Epic Real Estate Investing. My name is Mercedes Torres, your turnkey girl, and I am privileged enough to be partners in crime with Mr. Matt Terrio, the guy who created the epic real estate empire. If this is your first time here, glad you made it, make yourself at home.

If this is not your first time here for my repeating listeners, welcome back. So, first and foremost, I'm going to send out lots of love and shouts out to the listeners. that send me a little note or an email about last week's episode that I got to invite my special guest, Mr. Matt Terrio himself. I swear, we've been working together, I don't know, 14 years in real estate, and we don't very often record podcasts together, but we got to banter about an article that caught our attention last week because we were sequestered in a hotel room planning our following year. We start planning ahead of time, as you can tell.

And it caught our attention, and it was kind of fun to do a podcast with him. But I think what you guys mentioned most was that, you know, you got to see both sides of our perspectives. You know, as you know, we've been working together for quite some time. And so you got to hear a lot of the conversation that happens in our office. So it was fun to have them on the show. obviously you enjoyed it as well. So thank you for the notes that we had. Got a lot of little notes and emails and comments on Instagram and Facebook. So I welcome them all and I thank you for taking the

time to reach out. So this week, I want to talk about one of those topics that I speak on, I mean on a daily basis almost, and that is property management. I often get asked, especially when I'm speaking out in public, I can ask about how my property management team is so awesome. You know, how are we so successful with that? You know, how did you build your team Mercedes? How do you diversify your property management team? And what specifically do I look for in a property manager? So many years ago, actually, Matt Terrio and a very good friend of ours named Matt Andrews

did a podcast called Hold That House. And back in the day, we created a checklist. In fact, we called that checklist the 10 commandments of property manager. And believe it or not, not only does the checklist still exist because we've perfected it throughout the year, but that show is still on the Apple Wave Tunes or whatever podcast feed you listen to. That show was called Hold That House. And it really just focused on buying and holding homes, but, you know, it's really kind of boring.

You know, you buy a property and you hold it. But what makes all the difference in the world is what you do with the asset when you're holding it and how great your property manager does to get it to perform. So we created these 10 commandments for property management. And throughout the years, we've continued to use it, but more so, we've perfected it and to this day we still use it to screen our new property management teams especially when we start to diversify. You hear me talk a lot about diversification and I'll dive into that just a little bit because my friends I have learned throughout my years of experience

in our entire portfolio that it is critical to have a property manager that really understands you. understands real estate investing, and more important for you to diversify your property management team. So, here we go, my friends. Number one, I should get a drum roll, please. Hire a licensed property manager. Now, I know that sounds so basic, but believe it or not, my friends, there are people out there that claim to be property managers and are not licensed. Now, there are states out there that do not require you to have a license to have a property management company. However, most property managers, despite the state regulation, will have some type of license, whether it's a broker's license or a real estate agent license.

The reality is that somebody in our field that has taken the time to prep themselves for a state exam is because they're taking their business serious. So I will always say, even if your state does not require you to be licensed to be a property manager, you want to have a property manager that holds either a broker's license or a real estate agent license. That's rule number one. Okay. Rule number two, interview at least three property managers prior to hiring one. Now, the reason I say this, my friends, is because when you're... in the interviewing mode, property managers will tell you anything and everything they want you to hear. Let's face it, they're telling you everything you want to hear. But it's the pedal to the metal

that makes all the difference in the world. And when you talk to two, three, four, maybe even five, because I'm that crazy girl that does up to five. But when you start to compare what property manager number one said and compare it to what property manager number three said, you're going to be able to determine what's going to be the better fit based off of the answers they gave you. Now, hopefully you have a track record with your property manager. But when you're just interviewing to get the ball rolling in a market

or to even extend your market, it is critical that you speak to several of them. My minimum is three. And just to use those conversations as point of comparisons, not only for your criteria, but towards each other. Okay, so interview at least three property managers prior to hiring that one. Number three, review all property management agreements and lease. and ask questions prior to hiring your property manager. Now, you need to be crystal clear on all of the fees. Are they charging you an 8% flat fee, whether you have a tenant or not?

Or are they charging you a 10% fee of the rents collected? It is critical that you are clear about that because at the end of the days, my friends, it is all about your numbers. It's about having clarity on what those numbers are so that your analysis of your property are on point. Also, be clear as to whether your property manager charges a pet deposit or do they charge pet rent. Now, you've heard me say this before. I am a huge fan of pet rent. I do not charge my tenants a deposit for a dog or a cat, but I do charge $25 a dog or $23 for a cat, and that's per animal. Now, why do I do that? It's because I want to keep that rent for myself. A deposit, you have to give it back at the end of the year or at the end of the term. So be clear as

to what your property management agreement says. Is it pet rent or is it a pet deposit and no pet rent? Also, be crystal clear on your upfront fees or your re-up fees. What's the upfront fee that is established to set up your portfolio in their back office? Some people don't charge anything. They shouldn't. They're just setting you up. Other people charge a set-up fee of a home. $150. So be clear as to what that is. And then be clear if there's a re-up fee. If your tenant renews the lease, are they charging you a portion of that? Is it 50% of the rent? Is it 80% of the rent? Or is it a flat fee of $100? So be very clear as to what is on the management agreement, as well as to what is on the lease that your tenant is going to be signing. Now, many leases and property management agreements are

mandated by the state. And if that's the case, your property manager won't have a lot of ability to negotiate certain fees or certain procedures. But if that's the case, they will absolutely tell you about it and then you're able to confirm that with the state laws. Okay, So be very clear as to that. Make sure you review all of that before you dive in. Number four, do not steal a property management's income by overnegotiating their fees. Now, I say that because a lot of work goes into managing your property. Not only do they have to manage the property and maintain it and report to you what's transpiring

with your property, but they need to find the tenant. They need to screen the tenant. And in addition to that, it's very often that a tenant will go out to view the property and then we'll want to see it once or twice again if they're serious about renting it. So in many cases, the property manager has to go out two or three times before the lease is signed. So don't overnegotiate the fee that that the property manager charges to place your tenant. It's very common that a property manager charges you 50% of the rents collected, even up to one month. So if your rent is $850, it's common that your property manager keeps that first $850

for finding the tenant, placing them, screening them, and then meeting them two or three times at your property. So don't make the mistake of over-negotiating their fees because truly at the end of the day, a good property manager truly deserves that fee. Number five, find a property manager that invest in real estate themselves. Now, I do not say that lightly. A property manager needs to fully understand the game that you are playing and one of the best ways, for them to understand that is if they're actually investing in real estate themselves.

I'll be very honest in saying that one of the reasons my property managers are so good at what they do is because they started their property management company because they were investors and their property managers utterly sucked at property managing their properties. So many of my property managers started their property management company by accident because they hated the way their property manager was running their own properties. So make sure that your property manager understands the world of investing and it truly helps if they are uninvested themselves. Number six, be firm but fair and set your expectations clear for your property manager. Now, don't be unreasonable. Don't ask your property manager to do something that you wouldn't do yourself.

And that would mean like randomly doing an inspection eight months into the lease with your tenant. Now, unless there's a rhyme or reason why you would want to, inspect the property, don't randomly ask your property manager to do something that makes no rhyme or reason to any party in the transaction. I have had my own clients say, you know, I all of a sudden want to see how such and such is running in the house. Trust me, my friends, if there's an issue with such and such, the property manager and surely the tenant will let you know. So don't be in reasonable about what you ask your property manager to do. Okay? Number seven, hire a bookkeeper to maintain and monitor your rent rolls and your books.

Now, originally, when you get started, you know, when you have two or three properties, it's very common for you to do it yourself. Some people I have seen my own clients do it up to six properties. Now, mind you, most of our cash flow savvy clients are busy professionals. They have something else going on. They're either engineers or physicians or dentists or work full-time doing something else. And they really don't have the time to oversee their properties. So this is why they hire a property manager, but it helps so much to hire a part-time bookkeeper to maintain and monitor your rentals and your books. At the end of the day, my friend, hiring a bookkeeper, it's really inexpensive to do and well worth your time. There's several services out there that would allow you

to hire a bookkeeper just so much as like three to five hours a week. And in most cases, when you first get started, three hours a week is more than enough. And it just makes your life so much easier. It is totally worth your investment to hire that person. And again, when you have your first few properties, you may not need it. It's when you start to get multiple properties that it could start to get a little bit more complicated. So simplify your life when you find that overseeing multiple properties is starting to dip into your day and your pocketbook. Number eight, schedule at least once a quarter to review your books not only with your property manager, but with your newly hired bookkeeper. It'll literally take maybe 30 minutes to an hour, once a quarter, to have a conversation with your

property manager and your bookkeeper. Now, naturally, my friends, you are going to be on top of your bookkeeping once a month. When you first start, and even as your portfolio starts to grow, You don't really have to spend a whole lot of time per property, just making sure that everything is running smoothly. When you start to get into multiple properties, it's when it starts to become worth it to have a 30-minute conversation once a quarter with the team that's going to support you financially. So that is really important for you to consider. Number nine, diversify property managers. My friends, I am adamant about this, especially when you start to grow your portfolio. This is one of the biggest reasons for failures.

In fact, I'm going to share something that happened to Matt and I several years ago, and we've shared it on other podcasts before, but it's certainly worth mentioning. When Matt and I first started, one of our first markets was Danville, Illinois, and Memphis, Tennessee. Ever heard of Danville, Illinois? Because there's like nobody out there. But no offense to Danville, Illinois people, but it's very, very small.

And it was a great opportunity to invest. And then we jumped into the Memphis, Tennessee market, had lots of success. And in that market, our portfolio grew to about 68 properties. And that's collectively. Matt and I had about 30 properties, and the rest were properties that we had sorted and sold to our investors for cash flow.

So they were strictly all buy and hold properties where Matt and I were holding our own portfolio and then our clients were holding their portfolios as well. And at that time, 68 or 68 properties, they were all being managed by one property manager. And unbeknownst to us, one morning we got a call and the property manager had passed away. We were not only devastated, but we were floored because I had 68 properties in Memphis, Tennessee,

and I had no idea what I was going to do. So not only was it our 30 properties, it was 38 properties that we had sold to our investors, and I had no other alternate team on the ground. So naturally, the whole office went into morning, the whole property management office went into morning, and nobody worked that week, and it just so happened that it fell into the week of collecting rents. Rents were not collected.

It was just a hot, chaotic mess. And I instantly had to go into the mode of, oh my goodness, how am I going to take care of these 68 property managers? So I had to divide them. And the property management's on the ground knew what had happened, obviously. So everybody, every property manager was trying to gain our business. And they were telling us everything we wanted to hear. Of course, they wanted our 68 properties.

So luckily, I had to make the decision of hiring different ones. I didn't have a choice. I tried to do as much betting as possible. But then think about all. the other people that also had properties with this property manager that had to do the same thing I had to do. So the process took me about three months to remove all of our properties from this property management team where the property manager had passed away and had no other plan because it was a one-man show, mistake number two, or I should say mistake number 50, but

he was a one-man show so when he passed away, the team, although they were a great team, there was no leader. And so naturally that property management company fell apart while I'm trying to move 68 properties from there. So needless to say, it took me a total of six months to get it back to running mode, but it taught me the biggest lesson of my life and it is to never, ever depend on one property management team in a market. Always have an alternate team on standby that you're comfortable with and always let them know of one another. So my friends, that was probably one of the most expensive lessons that I've ever had to learn. And then I personally had to call 38 of my clients to have this conversation with them. Now luckily, I was able to fix it all. Again, it took me

almost six months to do it, but taught me the biggest lesson of my life to never do that again. So hope you got that lesson. My friends, diversify property management, always have more than one team on the ground. Even if you have only two properties, consider the third property should go with a new team. Okay. And number 10, finally, do not ask property managers for favors that are not compensated. So do not ask them to do work for free. Now, my friends, we're all in the business to make money. So don't nickel and dime your property manager because I speak from experience, my friends, they will start to nickel and dime you. My friends, I will have to say I am really lucky because Matt and I have awesome teams on the ground. And let me just tell you, they're not all

Perfect. Sometimes there is a lapse of communication. Let's face it, our property managers are on the field all day long. They're tending to our tenants. Sometimes communication laps a little bit. It's a little bit slower than what we wanted to be. Sometimes our property management teams cater to our tenants. And although we're important to them, they communicate more with the tenants than they do with us. All you need to worry about is if you're getting your rent check every 15th of the month, then you know that you have a great property management team on the ground. And as I was saying, Matt and I are lucky to have these awesome teams that we get to share with our cash flow savvy clients that mainly they're awesome because we've spent so much time weeding out the bad and only keeping the good. I mean, it makes a world of sense. If a property manager cannot understand our mindset or cannot hang with the people that are in this business to look at our investment property as a true investment, then they don't need to be providing us with property management services. It makes all the difference in the world to have a property manager that understands real estate investing that understands how important the tenant is, but understands the motive of the investor and why they're in the world of investing.

So if you need my help, my friends, feel free to reach out to me. Send me an email. I promise I answer all of the emails. Sometimes it takes me a couple days, but hang in there. I will get back to you. My email is Mercedes at Epicrealestate.com. Or reach out to me on our website at cashflow savvy.com. that savvy with 2Vs, check out what I share with you about escaping the rat race, about even

getting the 10 commandments of property management. So, my friends, until next week, let's stay connected. But until next turnkey Tuesday, where cash flow is king, have an epic week. Do you have doubts about your current plan for retirement actually panning out? Imagine revolutionizing your retirement plan so it pays. you right now and in retirement. Change one thing, one time, and that revolution can be yours. That's bad news for Wall Street, but great news for you. We're cash flow savvy, and we'd like to offer you free information that will show you how one simple tweak can cause your retirement plan to pay you right now and in retirement, and it's yours for free. For the secret your financial planner

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